Sale and Purchase of Real Property Resumes for the First Time Since the Beginning of Martial Law in Ukraine
Written by Roman Riabenko, Senior Associate, Vasil Kisil & Partners
The Cabinet of Ministers of Ukraine has finally published Resolution No. 480 of 19 April 2022 (the “Resolution”), which, among other things, renews state registration of real property titles. It was officially published in the Uriadovyi Kurier newspaper and, accordingly, entered into force on 28 April.
The Resolution provides for a number of restrictions, which, as the Minister of Justice has repeatedly stated earlier, are aimed at preventing wrongful interference with and misuse of real property under martial law:
- not all notaries will be allowed to perform notarial acts;
- notaries are prohibited from performing notarial acts under a power of attorney on behalf of individuals;
- a ban is imposed on contributing property to the authorized capital or taking property out of a company when withdrawing from it;
- further alienation of real property is allowed not earlier than in a month; and
- notarial acts may only be performed within regional boundaries.
In particular, not all notaries will be able to perform notarial acts in respect of real property, corporate rights, securities, matrimonial property interests, issued powers of attorney to access a safe deposit box – which are described in more detail in the Resolution as notarial acts in respect of valuable assets. The Ministry of Justice of Ukraine shall prepare a list of notaries who are allowed to perform notarial acts in respect of valuable assets, in particular in respect of real property, under martial law, depending on whether they have previously committed violations listed in the Resolution. Some notaries will also be limited in what notarial acts they may perform and in relation to what type of property qualified by the Resolution as valuable. The prohibition to perform certain notarial acts shall be specified in the respective reservation made in the list of notaries to be compiled by the Ministry of Justice.
Additionally, the Resolution prohibits the notarial acts and registrations, in particular to alienate real property or change the list of participants of a company, under a power of attorney on behalf of an individual. New powers of attorney to dispose of real property must still be issued on a notary letterhead.
Moreover, real property may not be contributed into the authorized capital of a legal entity or received in connection with withdrawal of a participant. Such a restriction may be aimed at preventing from circumventing the other restrictions and business raids.
As a general rule, real property may be alienated at least one month after it was acquired. This is expected to prevent chains of bona fide purchasers from being set up over a short period often to make it more complicated to repossess the real estate unlawfully disposed of. Therefore, this rule is not, in particular, applicable to the sale of property that has been inherited or received by allocating shares in joint co-ownership, which sale does not normally give rise to such a risk. However, in view of the operational difficulties currently experienced by courts, such chains may be as well created for a period longer than one month.
A sale, mortgage, or property management agreement made in relation to real property may be certified solely within the region where such property is located. A similar restriction has been in place since 2016 when the possibility to register rights to real property anywhere in Ukraine, no matter where it was located, was discarded under the pretext of preventing raider schemes. By way of an exception, the Resolution introduces the principle of extraterritoriality in relation to real property located in Kyiv and Kyiv Region, allowing notarial acts and state registration in relation to such property within Kyiv and Kyiv Region, apart from the state registration resulting from accepting the inheritance.
The Resolution sets out a procedure to apply for and complete the registration actions that had been requested before the martial law was introduced and are still pending.
We hope that, once real property transactions are resumed, this will facilitate the market to revive in terms of martial law and make it possible for businesses and citizens to manage their property and to meet their needs more effectively.